چکیده انگلیسی

This article develops indicators of vulnerability in employment in seven economic capitals of West Africa and studies their links with individual incomes. Quantitative, distributional and qualitative analyses show that vulnerability compensating mechanism is mainly seen in the informal sector, in the upper tail of the earnings distribution and particularly in the circumstance of visible underemployment. Employment vulnerability is not compensated for the poorest workers in the private sector. Long “job queues” and weak institutional protection of workers may have reduced bargaining power in the formal sector.

مقدمه انگلیسی

Urban labor market workers in sub-Saharan Africa work in often highly insecure conditions. The World Bank’s (2001) report states that job insecurity is a major concern among poor workers, and job instability is a leading cause and expression of poverty. One of the main focuses of studies on labor markets in sub-Saharan Africa is the institutional segmentation between formal and informal sectors (Maloney, 2004). Informal work is defined from the point of view of the firm, worker or line of business depending on the policy aims. The 1993 System of National Accounts (SNA93)—comprising a set of international standards designed to establish a framework for the production of statistics on national accounts—defines a distinction at firm level based on statistical or tax registration criteria and keeping written accounts.
Yet this distinction serves no purpose when it comes to capturing individuals’ working conditions, especially employment vulnerability. By vulnerability, we mean how hard it is for individuals to manage the risks or cope with the losses and costs associated with the occurrence of risky events or situations.1 For example, the vulnerability of workers can be seen, among other things, in terms of contract insecurity (unstable remuneration and no written contract), or adverse working conditions. Vulnerable workers can be found in all sorts of formal and informal private firms, but also in administrations and public and semi-public corporations. A good many vulnerable workers work in the formal private sector, as per the SNA93 definition of the term. This paper focuses solely on the private sector (formal and informal businesses), based on the assumption that vulnerability is driven by different mechanisms in the public and private sectors.
We build employment vulnerability indicators and study their links with earned income. The theory of compensating differentials formalized in the 1980s2 states that workers may receive pecuniary compensation commensurate with the strenuous or hazardous nature of their tasks or adverse working conditions. In the developed countries, for example, it has been observed that physically hazardous and highly strenuous jobs are often better paid than less strenuous or hazardous jobs.3 Our interpretation of the link between vulnerability and income draws then on developments in the theory of compensating differentials. While the overall purpose of this paper is not to test the predictions of this theory in all its components, a working assumption we still investigate is whether, other things being equal, workers classified as vulnerable may be better paid than more stable workers occupying less strenuous jobs. Should this be the case, an incentive should be found for certain individuals to hold a vulnerable job, especially if the medium- or long-run advantage associated with stable jobs is not valued by households forced into short-term income management. These households should prefer higher, immediate earnings—even from a vulnerable job—to stable earnings over a longer period. A high earnings incentive for vulnerable jobs would increase the risk to fall into poverty. In this paper, we do not deal with adverse working conditions stricto sensu, such as job health hazards, but use a broader concept of vulnerability in employment. This concept does not necessarily entail compensating mechanisms as predicted by the theory of compensating differentials. Our results cannot therefore be used to validate the applicability of the theoretical predictions across developed and developing countries. The motivation for this study is rather to determine whether possible compensating differentials can explain the acceptance of generally bad working conditions as observed in these cities or not.
The questions of vulnerability determinants and the link between vulnerability and remuneration raise a certain number of methodological problems that this paper endeavors to solve. First of all, there is the existence of labor market entry selection and endogenous sector allocation across the public, formal private or informal private sectors. Observable individual characteristics (such as human capital in general), but also unobservable individual characteristics, influence both the decision to participate to a labor market segment and the level of individual earnings in Africa.4 Not taking this into account may lead to biased estimates of the determinants of individual earnings. Secondly, there is a likelihood of vulnerability being endogenous in the earnings equations. Vulnerability would be endogenous if the individuals’ unobservable characteristics are correlated with both their level of vulnerability and their level of earnings. Selection and endogeneity, if not taken into account, can produce biases in the estimation of the relationship between vulnerability and earnings. For instance, an overestimation of the positive impact of vulnerability on individual earnings may appear if unobservable characteristics, such as worker perseverance, are positively correlated with the probability of taking up a vulnerable job while simultaneously being positively correlated with earnings.5
Our analysis also takes a distributional approach. Another working assumption is that vulnerability can have a different effect on income depending on the worker’s relative position on the remuneration scale. Hence, for equal observable characteristics, workers at the lower tail of the earnings distribution (poor) could be penalized in monetary terms by their vulnerability whereas workers at the top of the distribution (wealthy) might not be penalized and may well receive pecuniary compensation in vulnerable jobs. These different pay mechanisms depending on remuneration scale position could be due to bargaining power differences and labor market imbalances. In the first case, greater bargaining power for the wealthy would enable workers at the upper tail of the earnings distribution to secure higher compensation for the vulnerability of their jobs. Conversely, workers at the bottom of the earnings distribution might be more forceful in negotiations for premium pay if they are seeking to secure a living wage. Compensation for vulnerability would therefore decrease the further the worker moved from a minimum subsistence income. In the case of labor market imbalances, the employer’s capacity to provide financial compensation for adverse working conditions might also differ depending on the type of imbalances found in certain market segments, in particular along the length of the skills and hence earnings distribution. For example, it would make sense to find that employers in segments where labor supply far outstrips demand are reluctant to pay workers more for adverse working conditions. These hypotheses, which assume that the effect of vulnerability on earnings differs depending on the position in the earnings distribution, are tested using quantile regressions.
Lastly, our analysis takes a “qualitative” approach, conducting a principal component factor analysis on the different aspects of the vulnerability phenomenon. The main components obtained, which represent the different qualitative facets of vulnerability (contractual insecurity, working conditions, underemployment and stopgap jobs mismatched with the individual’s characteristics), are then used as vulnerability variables.
This paper gives empirical results on seven West African capital cities that are part of a fairly economically integrated West African Economic and Monetary Union (WAEMU), sharing a common currency (CFA Franc) with fixed parity to the Euro. The data were collected in 2001–02 in a context of relative political stability, low inflation (4.1%; 1999–2003 average: 2.1%) and reasonably high GDP growth in the WAEMU region (3.9%; 1999–2003 average: 2.4%) (UEMOA, 2004), which contrasted with the 2001 global economic slowdown. The exception is Côte d’Ivoire where political turmoil6 led to an economic downturn (virtually no growth in 2001, and an average of −0.8% in 1999–2003). Except in this country, the relative economic prosperity in 2001 is hypothesized to effect positively on wages and on compensating differentials.
The remainder of the paper is structured as follows. In Section 2, we briefly study the theoretical arguments underlying the existence of compensating differentials and highlight some theoretical implications for our case study. In Section 3, we present the data drawn from the 1-2-3 Surveys of the West African economic capitals and the construction of certain key variables for our analyses. Section 4 details our econometric models. The results of these analyses are discussed in Section 5 and our conclusions are put forward in Section 6.

نتیجه گیری انگلیسی

In this paper, we develop indicators of employment vulnerability in seven West African economic capitals (Abidjan, Bamako, Cotonou, Dakar, Lome, Niamey and Ouagadougou) and study their links with individual earnings from the main job. The theory of compensating differentials, formalized in the 1980s, states that workers may receive pecuniary compensation commensurate with the strenuous or hazardous nature of their tasks or adverse working conditions. A certain number of empirical studies have recently found evidence of this type of compensation in developed countries, but often with contradictory conclusions. Our interpretation of the link between employment status and income draws on these developments, applying them not just to working conditions themselves, but more broadly to vulnerability in employment (contractual insecurity, working conditions, underemployment and stopgap jobs mismatched with individual characteristics). Employment vulnerability is a dominant characteristic of the urban labor markets in sub-Saharan Africa, where the overwhelming majority of workers work in insecure jobs and/or in the informal sector. Our composite indicator of vulnerability in employment reveals that 85% of the private sector workers in all the economic capitals studied are vulnerable on the basis of at least one criterion. This would suggest that all the cities’ labor markets impose a minimum level of vulnerability.
Our analysis of the effects of vulnerability on earnings is in turn quantitative, distributional and qualitative. The quantitative analysis finds that the impact of vulnerability on earnings is generally negative for an average level of vulnerability despite a relative economic prosperity in the year 2001 when the data were collected. In the formal private sector, income losses due to vulnerability are lower for high levels of vulnerability but do not translate into gains. In the informal sector, however, the average predicted income for high vulnerability is higher than the average predicted income for relatively low vulnerability. The assumption that average earnings may compensate for a certain level of vulnerability cannot be rejected in the informal sector. This could partly explain why the informal sector is attracting more workers than the formal sector. This compensation or lesser-loss mechanism for high levels of vulnerability is moreover found to concern a not inconsiderable share of workers. However, imposed “minimum” vulnerability is not compensated for since it is common to nearly all workers: it is an inherent characteristic of the job markets in these cities.
Regarding the absence of compensating mechanisms in the formal private sector, one may think of it as a consequence of the long “job queue” at this sector’s entry (see the influential theoretical model of Thurow, 1972). Indeed, for years, the existence of significant rents in the formal sector in these countries is known to be so high that it is rational for individuals to queue for a formal sector job. The massive decrease in access to public jobs is common to many countries in sub-Saharan Africa, confronted since the early 1980s with a serious crisis in public finances and engaged in structural adjustment policies. This difficulty to access formal sector jobs23 then certainly reduces workers’ bargaining power once they have the chance to become insiders.
The earlier mentioned marginal effects are estimated by regressions on the earnings average, which conceals variations in the magnitude of the impact of vulnerability along the earnings distribution. Our quantile regressions find evidence that the impact of vulnerability on earnings is not uniform, particularly in the informal sector. For example, in the informal sectors in Dakar, Cotonou and Bamako, the marginal effect of average vulnerability is positive for the upper deciles of the earnings distribution. Informal sector in these cities—Dakar, Cotonou and, to a lesser extent, Bamako—display both the highest compensation for high levels of vulnerability and positive effects of average vulnerability on income among the highest earnings.
Compensating wage differentials are then found for earnings at the upper tail of the distribution. The compensating mechanism does not concern the poorest workers. Although the poorest dependent workers should be the most forceful in wage bargaining in an endeavor to earn a living wage, they have less bargaining power due to the urgent nature of their needs. Urban labor market imbalances could also explain this absence of compensating wage differentials at the lower tail of the distribution, where labor supply probably far exceeds demand.24 Similarly, the poorest independent workers suffer more from their vulnerability and do not adopt strategies to compensate for it by increasing their profits (raising receipts or reducing expenditure). An independent worker at the upper tail of the earnings distribution could more easily make trade-offs between working conditions and earnings.
However, the different aspects of vulnerability have diverse impacts on income. For example, working a second vulnerable job has a negative effect on the average earnings of independent workers in the informal sector, but no impact in the formal private sector. So, working a second insecure job could be seen as a way of diversifying excessive risks associated with a vulnerable main job in the informal sector. Also, wages do not compensate for contractual insecurity among dependent workers or for itinerant, solitary work among independent workers in any of the cities or institutional sectors. The only pecuniary compensation mechanism for vulnerability is found with visible underemployment, which has a positive impact on the average earnings of dependent workers in both sectors and independent workers in the informal sector.
In a nutshell, vulnerability compensating mechanism is mainly seen in the informal sector, in the upper tail of the earning distribution and particularly in the circumstance of visible underemployment. The private formal sector does not offer the best protection against the common features of employment vulnerability. Vulnerability, which is the norm in West African cities, is not compensated for the largest part of the labor force, that is, the full-time workers in the private sector. A slight compensating mechanism is at work in the informal sector, all things being equal, but even then, the marginal effect of the vulnerability on earnings appears well above the mean vulnerability index, the only clear exception being Dakar.
Whereas our analysis does not generally confirm the applicability of the theory of compensating differentials on West African cities, especially where these compensating mechanisms should be most expected (i.e., in the formal sector), an institutional approach might be more relevant in the African urban context. In such peripheral cities in the world economy, workers’ unions are essentially active in the public sector, notably weak in the formal private sector and virtually non-existent in the informal private sector. The same can be said of employment laws and worker’s rights that are hardly enforced. As a result, the bargaining power of both independent and dependent workers is very weak. There remains to confirm if our results, based on the relatively homogenous WAEMU region, can be generalized to the continent. For instance, we may expect more compensating mechanisms in cities in South Africa or in Northern African countries. Being less peripheral than West African cities, workers unions are more powerful there, while workers rights and employment regulations are better respected.